Earnings Shortfall Predicted

CORPORATE

Sensormatic Deal Ends Sec Action

March 27, 1998|By L.A. LOREK Business Writer and Information from Bloomberg News was used in this report.

Sensormatic Electronics Corp. reported on Thursday that its third-quarter results will not meet analysts' estimates because of sluggish sales in Europe and Asia.

The Boca Raton-based company, which makes anti-theft devices, also announced plans to raise $150 million in a private sale of preferred stock to institutional investors. Part of the proceeds from that sale will pay the $43.5 million remaining on a settlement of a shareholder class-action lawsuit.

Sensormatic also confirmed that it has reached a settlement with the U.S. Securities and Exchange Commission to end a three-year investigation into the company's accounting practices.

The SEC settlement includes $140,000 in fines against founder and Chairman Ronald Assaf, former Chief Operating Officer Michael Pardue and former Vice President of Finance Lawrence Simmons. Assaf and Simmons both received $50,000 fines and Pardue received a $40,000 fine.

The fines stem from illegal manipulation of the company's quarterly revenue and earnings in 1994 and 1995, according to SEC regulators. The financial manipulation also sparked the shareholders' suit.

As part of the settlement, Assaf and the former executives denied any wrongdoing and agreed not to violate federal securities law in the future. Sensormatic was not fined.

``With the SEC investigation completed and acceptable settlement reached, we can now focus our energies more intently on our business and the future,'' said CEO and President Robert A. Vanourek. ``Over the past two years, we have instituted significant changes, including improved financial controls, a new internal audit group, and many new senior managers. This announcement closes another chapter in our history and we are ready to move forward.''

Meanwhile, Sensormatic said it expects to report earnings of 10 cents to 12 cents a share for the quarter ending next Tuesday.

It was forecast to earn 12 cents, the average estimate of six analysts polled by IBES International Inc. It expects to post revenue of about $235 million, lower than analysts' estimates of $245 million. In the year-ago quarter, Sensormatic earned 8 cents a share on revenue of $250.1 million.

Sensormatic's revenue growth from selling security devices to Asian stores has slowed because of the strong U.S. dollar against other currencies, and the region's economic crisis, which cut back on business from stores there. Revenue from its European retail division also has remained stagnant as the company continues a series of cost-cutting moves initiated last August.

About 5 percent of Sensormatic's sales come from Asia retail operations, and about 30 percent come from the Europe division.

``They'll have slow earnings recovery,'' said Edward Tavlin, an analyst with Fahnestock & Co. ``Perhaps we'll see some good headway in the fourth quarter.'' He rates Sensormatic a ``buy.''

Sensormatic stock, traded under the symbol SRM, fell 38 cents to close Thursday at $16.69 on the New York Stock Exchange.